How to default on Greece’s euro zone?

As of late Tuesday, Greece had provided an important loan payment to the international monetary fund — making it a step closer to pulling out of the euro.

The government tried to negotiate a deal with the creditors. Greece still plans to hold a referendum on Sunday, giving people the chance to decide whether to accept the harsh terms of their bailout.

Lacking the money, Greece is in a more vulnerable position – and could eventually drive it out of the euro altogether.

Until this week, Oxford economics’ gabriel stern said Greece and its European creditors could still find a way to settle their differences. Now he says the odds of Greece remaining in the euro area are much smaller.

“Even if they are in a referendum” sure “vote, it is really a very desperate situation, Greece is now walking through a minefield, you can quit at any time,” stern said.

He said this week’s capital controls and bank failures in Greece complicated the economy. ‘once you ban people from getting their own money, it’s harder to restore the credibility of the financial system,’ he said.

“It’s crazy that the economy gets better deals through a week of capital controls and bank closures, because even if the deal ends, the economy will get worse even if the deal ends,” says Diego Ferro. Investment director of Greylock Capital. The company owns Greek bonds.

Mr Filo is more optimistic about Greece’s plight. He said there was still sufficient momentum to reach an agreement.

If Greece were forced out of the eurozone, he said, it would raise questions about the viability of the currency union – and other countries might flee. Mr. Filo said this week’s shutdown would put political pressure on Greece’s left-wing government to reach some sort of agreement.

“What you see is, day after day, people can’t cover the cost of the wedding, or because your money is trapped in the system and had to go to a doctor, so these measures are very effective not welcome,” said Ferro.

“When there is no margin of error, everyone is in a funk and there is a huge amount of volatility,” she said. “What may happen will cause panic, and then 24 hours later you’ll find yourself in an unexpected place.”

Gelpen points out what happened in 2008, when the financial crisis spun out of control and suddenly big institutions such as lehman brothers and aig were under intense pressure. In such an environment, wildcards may appear, which she says can quickly change political dynamics in Greece and elsewhere.

“It is hard to say how the final crisis will break and when the political will to stay in the union will collapse,” he said.

Both sides now say they want Greece to remain in the euro. But because Greece has missed payments to the international monetary fund, the crisis will go into uncharted territory. That could trigger a chain reaction that would allow people to rethink how far they would go to keep the euro zone alive.